Moody's Investors Service has revised to negative its outlook on Eagan-based Blue Cross and Blue Shield of Minnesota because of declines in commercial health insurance customers plus the expected arrival of for-profit HMO competitors in the state's health plan market.

In lowering the outlook, Moody's affirmed its rating of the financial strength at Blue Cross as well as the rating for the company's debt.

But Moody's noted a law change in early 2017 that eliminated a 40-year ban on for-profit HMOs in Minnesota, which is one factor driving competition next year from national carriers UnitedHealthcare and Aetna.

"For-profit HMO competitors will for the first time in decades be able to enter the Minnesota health care marketplace, with potential for disruption of local and carrier partnerships, likely placing pressure on growth opportunities and profit margins for [Blue Cross of Minnesota] and other local not-for-profit carriers," Moody's said in a July 30 report.

In the report, Moody's said Blue Cross still has a large market share in Minnesota [43 percent in 2017] as well as strong capital and a "well-diversified product set." The rating agency noted how Blue Cross succeeded in eliminating red ink from its business selling coverage to individuals under the federal Affordable Care Act (ACA).

"We are pleased the affirmed ratings for both our health plan business and unsecured debt remain very strong, reflecting the strength of our capital, continued market leadership and well-diversified product offerings," Blue Cross said in a statement.

Blue Cross, which is one of the state's largest health insurers, is part of a nonprofit company that recently changed its name from Aware Integrated Inc. to Stella. Last year, the parent company reported net income of $50 million on revenue of about $6.5 billion, according to Moody's.

In May 2017, insurance rating agency A.M. Best revised its outlook on Blue Cross to negative after large financial losses in ACA markets as well as big expenses with a new IT system. At the time, A.M. Best affirmed the financial strength and long-term credit rating at Blue Cross.

While the Moody's report cited the change in state law that opened the market to competition from for-profit HMOs, carriers always had the option to operate as for-profits with insurance company licenses. A forthcoming change with Medicare health plans is another reason Minnetonka-based UnitedHealthcare and Connecticut-based Aetna, in conjunction with Allina Health System, have talked about selling coverage in Minnesota for 2019.

Next year, more than 300,000 Minnesotans will change Medicare health plans when a federal law effectively eliminates "Medicare Cost" health plans in the Twin Cities and across much of the state. The Medicare-coverage shift creates an opportunity for new players.

Christopher Snowbeck covers health insurers, including Minnetonka-based UnitedHealth Group, and the business of running hospitals and clinics.